National Insurance Class 3 contributions and German tax

[PandaMunich]

Someone just said on a different forum that "Post-Brexit the Germans no longer accept contributions to the UK state system for deduction of tax, sadly. I just lost a fight with Finanzamt over this".

I suggested that is not correct and that Brexit has not changed anything in that regard. I assume that is correct?

Yes, you're right, since it doesn't say EU in Randziffer 4 of the BMF-Schreiben "Einkommensteuerrechtliche Behandlung von Vorsorgeaufwendungen": https://esth.bundesfinanzministerium.de ... nhalt.html

• 4
  Zu den Beiträgen nach § 10 Absatz 1 Nummer 2 Satz 1 Buchstabe a EStG gehören auch Beiträge an ausländische gesetzliche Rentenversicherungsträger (vgl. BFH vom 24. Juni 2009, BStBl II 2009, S. 1000); die inländischen Beitragsbemessungsgrenzen zur gesetzlichen RV sind insoweit nicht maßgebend.

• Contributions in accordance with § 10 para. 1 no. 2 sentence 1 letter a EStG also include contributions to foreign statutory pension insurance institutions (see BFH of 24 June 2009, BStBl II 2009, p. 1000); the domestic contribution assessment limits for statutory pension insurance are not relevant in this respect.

[GaryC]

Thanks. Will be interesting to see what the person comes back with when they have spoken to their adviser...

[HEM]

The UK may be talking about means-testing but the government isn't.

Thats a pretty good comment.

[kiplette]

So, while it may happen at some point,

I am wondering whether to suggest that kids#3&#4 start paying UK pension contributions voluntarily.

They are both employed here currently, and are hugely into investing their income (they weekly commute from our home, and their lives are very cheap in both places), so I don't know if their money would be well spent on those contributions anyway. I don't know if they have the right to anyway. One was employed by the UK Gov for a year or two, so I guess he could. The other one has always been German employed. They have lived in the UK but only as children.

Assuming none of us has a crystal ball all I'm looking for is a vague indication of whether it is possible and/or sensible for them? Any thoughts?

[GaryC]

They would each have to submit form CF83 to HMRC and soon, as the already extended deadline for years 2006/07 to 2018/19 to pay at all and for those years plus years up to 2023/24 to pay at the current rates expires on 5 April 2025. But as long as HMRC has the CF83 before that, the deadline is essentially extended as HMRC has said people will not be disadvantaged by their delays.

There is absolutely no downside to sending form CF83 as it doesn't commit you to doing anything - this is all voluntary.

Depending on their age, they my have the 3 freebie years as long as they turned 16, 17 and 18 before 6 April 2010. To pay NI voluntarily you need either 3 consecutive years of UK residence or 3 years on your NI record. On the surface they may qualify on that basis but HMRC will confirm the position.

Then, if you worked in the UK until immediately before you left, you open the door to pay at the cheaper Class 2 rate. If the Class 2 door is opened, then for any week they work abroad (Germany or elsewhere) they can pay Class 2. Otherwise it would always be Class 3 (what I have to pay as a UK resident).

I would:

• get the to set-up a Government Gateway ID using their NI number

• send the CF83

• get a pension forecast

• get a copy of their NI record

Discuss on here what that all means and see what HMRC come back with.

[snowingagain]

I am confident I have maxed out on contributions a few years ago, using the remarkably clonky old system of long phone conversations, followed up with a letter about 6 months later, outlining forecast and giving a long list of contributions required. Then paying them, and not getting any acknowledgement until asking for another forecast. Anyway, after getting excellent advice here I decided to do the new online thing, just to check. So, first thing was government gateway. Did not work as they do not seem to know my married name. So, back the the phone tomorrow. Will it be friendly Geordies, will "Ode to Joy" still be the on-hold music?

[Eric7]

They would each have to submit form CF83 to HMRC and soon, as the already extended deadline for years 2006/07 to 2018/19 to pay at all and for those years plus years up to 2023/24 to pay at the current rates expires on 5 April 2025. But as long as HMRC has the CF83 before that, the deadline is essentially extended as HMRC has said people will not be disadvantaged by their delays.

There is absolutely no downside to sending form CF83 as it doesn't commit you to doing anything - this is all voluntary.

Depending on their age, they my have the 3 freebie years as long as they turned 16, 17 and 18 before 6 April 2010. To pay NI voluntarily you need either 3 consecutive years of UK residence or 3 years on your NI record. On the surface they may qualify on that basis but HMRC will confirm the position.

Then, if you worked in the UK until immediately before you left, you open the door to pay at the cheaper Class 2 rate. If the Class 2 door is opened, then for any week they work abroad (Germany or elsewhere) they can pay Class 2. Otherwise it would always be Class 3 (what I have to pay as a UK resident).

I would:

• get the to set-up a Government Gateway ID using their NI number

• send the CF83

• get a pension forecast

• get a copy of their NI record

Discuss on here what that all means and see what HMRC come back with.

Gary... my last full year of contributions is 1990 but I only actually left the UK in 1993 (I was at college until then).
Is this something which will be checked? Could I say I left in 1990 and get away with it?

[Eric7]

They would each have to submit form CF83 to HMRC and soon, as the already extended deadline for years 2006/07 to 2018/19 to pay at all and for those years plus years up to 2023/24 to pay at the current rates expires on 5 April 2025. But as long as HMRC has the CF83 before that, the deadline is essentially extended as HMRC has said people will not be disadvantaged by their delays.

There is absolutely no downside to sending form CF83 as it doesn't commit you to doing anything - this is all voluntary.

Depending on their age, they my have the 3 freebie years as long as they turned 16, 17 and 18 before 6 April 2010. To pay NI voluntarily you need either 3 consecutive years of UK residence or 3 years on your NI record. On the surface they may qualify on that basis but HMRC will confirm the position.

Then, if you worked in the UK until immediately before you left, you open the door to pay at the cheaper Class 2 rate. If the Class 2 door is opened, then for any week they work abroad (Germany or elsewhere) they can pay Class 2. Otherwise it would always be Class 3 (what I have to pay as a UK resident).

I would:

• get the to set-up a Government Gateway ID using their NI number

• send the CF83

• get a pension forecast

• get a copy of their NI record

Discuss on here what that all means and see what HMRC come back with.

Gary... my last full year of contributions is 1990 but I only actually left the UK in 1993 (I was at college until then).
Is this something which will be checked? Could I say I left in 1990 and get away with it?

Actually, I just checked again and there is a record of me making some contributions up to 1993 so I might be ok anyway,

[kiplette]

Depending on their age, they my have the 3 freebie years as long as they turned 16, 17 and 18 before 6 April 2010.

Thank you for your great answer, Gary. Useful to anyone looking at this subject.

In our particular case, what I didn't make clear is that they really are almost actual kids - 21 and 22. They only lived in the UK from 2003 to 2005 (20/22 mths), and the one who has some UK work history was working here in Germany as a UK reservist soldier (2 years max).

I think they are ineligible looking at what you have written.

Thank you so much for the clear information you give - so helpful for those searching for info!

[Fraufruit]

How about they just start investing in funds or ETF's? They usually outperform pension schemes.

[GaryC]

They would each have to submit form CF83 to HMRC and soon, as the already extended deadline for years 2006/07 to 2018/19 to pay at all and for those years plus years up to 2023/24 to pay at the current rates expires on 5 April 2025. But as long as HMRC has the CF83 before that, the deadline is essentially extended as HMRC has said people will not be disadvantaged by their delays.

There is absolutely no downside to sending form CF83 as it doesn't commit you to doing anything - this is all voluntary.

Depending on their age, they my have the 3 freebie years as long as they turned 16, 17 and 18 before 6 April 2010. To pay NI voluntarily you need either 3 consecutive years of UK residence or 3 years on your NI record. On the surface they may qualify on that basis but HMRC will confirm the position.

Then, if you worked in the UK until immediately before you left, you open the door to pay at the cheaper Class 2 rate. If the Class 2 door is opened, then for any week they work abroad (Germany or elsewhere) they can pay Class 2. Otherwise it would always be Class 3 (what I have to pay as a UK resident).

I would:

• get the to set-up a Government Gateway ID using their NI number

• send the CF83

• get a pension forecast

• get a copy of their NI record

Discuss on here what that all means and see what HMRC come back with.

Gary... my last full year of contributions is 1990 but I only actually left the UK in 1993 (I was at college until then).
Is this something which will be checked? Could I say I left in 1990 and get away with it?

Actually, I just checked again and there is a record of me making some contributions up to 1993 so I might be ok anyway,

HMRC have your NI record and will see when contributions stopped. Fraudulently completing the form would not be a good idea...

[GaryC]

Depending on their age, they my have the 3 freebie years as long as they turned 16, 17 and 18 before 6 April 2010.

Thank you for your great answer, Gary. Useful to anyone looking at this subject.

In our particular case, what I didn't make clear is that they really are almost actual kids - 21 and 22. They only lived in the UK from 2003 to 2005 (20/22 mths), and the one who has some UK work history was working here in Germany as a UK reservist soldier (2 years max).

I think they are ineligible looking at what you have written.

Thank you so much for the clear information you give - so helpful for those searching for info!

It does sound as though they might not have sufficient residence or NI

[GaryC]

How about they just start investing in funds or ETF's? They usually outperform pension schemes.

The option to make voluntary contributions to the UK system is incredibly generous, especially if you can pay at the "give-away" Class 2 rate. The UK state pension is based on qualifying National Insurance years and at Class 2 a year currently costs £179.40 to add £328.64 per year to your pension. Once you have sufficient "full years" you no longer need to make voluntary contributions.

The pension, and any additional amount through paying voluntarily, is index-linked until, and after, you claim the pension. The additional amount from paying an additional NI year will increase by 4.1% to £342 from April 2025 and by not less than 2.5% annually after that until at least 2029. After that the UK has a general election and the new government could abandon the so-called Triple Lock (the better of 2.5%, price inflation and wages inflation), and revert to the statutory earnings inflation annual increase but that seems unlikely as the TL still enjoys the support of all main parties.

Private pensions would have to go some to equal that...

[kiplette]

It does sound as though they might not have sufficient residence or NI

Bit of a bugger because Brit pensions are so good, but also no surprise.

How about they just start investing in funds or ETF's? They usually outperform pension schemes.

Yup, good plan - they are big into investing (don't think ETFs, I think they choose what they fancy - Rheinmetall was obv a good shout, Vietnamese cars less so ), and will obviously also get German pensions, one possibly as a Beamter, so I think they'll be fine. Not having studied and got going with their jobs with barely any outgoings at age 20 has been a huge plus for their early financial gain.

[Fraufruit]

They sound pretty amazing, Mom. You done good.

[Eric7]

Gary... my last full year of contributions is 1990 but I only actually left the UK in 1993 (I was at college until then).
Is this something which will be checked? Could I say I left in 1990 and get away with it?

Actually, I just checked again and there is a record of me making some contributions up to 1993 so I might be ok anyway,

HMRC have your NI record and will see when contributions stopped. Fraudulently completing the form would not be a good idea...

Yeah, agreed!

It's all done now and submitted - super easy.
I should apparently expect a reply in June.

[GaryC]

Online CF83 forms are being worked much quicker than paper forms. Someone recently had a reply in about 2 weeks!

[HEM]

The option to make voluntary contributions to the UK system is incredibly generous, especially if you can pay at the "give-away" Class 2 rate. The UK state pension is based on qualifying National Insurance years and at Class 2 a year currently costs £179.40 to add £328.64 per year to your pension. Once you have sufficient "full years" you no longer need to make voluntary contributions.
<SNIP>

I will second that - although I was a little late to the party I was able to add 11 years of Class 2 contributions before I retired here thus upping my years from 15 to 26. I only had to survive retirement for just over a year to break even.

I believe it was Panda who pointed out this possibility, for which I am eternally grateful.

A further advantage if you are then living in DE is that according to the Dual Taxation agreement the UK state pension is taxed in the UK AND the UK applies the tax-free allowance - in my case I fall well under that threshold. The amount that arrives in your German account goes into the progression, which is a much lesser evil - HMRC were agast when I told them on the phone about the UK pension having to be mentioned at all.

[GaryC]

As former HMRC, albeit long-since away from the front line work in my head office ivory tower, lol, I can understand the officer's surprise when you mentioned progression. The UK tax system just doesn't have a concept like that, so the average employee just wouldn't grasp it. Foreign income is either taxable in the UK and features on the tax return, or not, when the most you do is say, "Hey guys, I have this foreign income but you can't touch it because you gave taxing rights to the other country under the DTA", or words to that effect.

It took me a while to get my head round when trying to figure out how we now have to deal with the German FA from the UK, given that both Mrs C and I have German pensions...